Aldar, Sorouh Eye Merger
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Aldar, Sorouh Eye Merger

Aldar, Sorouh Eye Merger

The UAE-based property developers are discussing ways to merge in a government-backed tie-up.

Gulf Business

Abu Dhabi developer Aldar Properties, which has twice been rescued by the Abu Dhabi government with bailouts totalling $10 billion, may merge with local rival Sorouh Real Estate in a state-backed tie-up, the two firms said on Sunday.

Any merger decision will be made in the next three months after a joint committee assesses the matter. No further details were provided.

“Aldar and Sorouh are discussing ways to merge with the blessing of the Abu Dhabi government,” said the joint statement to the Abu Dhabi bourse.

Aldar, which is majority-owned by Abu Dhabi and built the Yas Marina Formula One circuit, has relied heavily on the government over the past 18 months.

State investment fund Mubadala has also played a key role in Aldar’s bailout by subscribing to a $2.8 billion bond issued by the developer in March 2011. It currently owns 49-percent of the developer.

Sources told Reuters in January that Abu Dhabi had held talks to offload all or part of the Aldar stake in an attempt to stop its falling asset value from dragging down Mubadala.

The indebted developer, the biggest in Abu Dhabi by market value, has been hit by slumping property prices in the United Arab Emirates, forcing it to sell key projects to the government including its Ferrari World theme park.

The two are the No. 1 and 2 developers in the emirate, with the smaller Sorouh faring better than its bigger rival amid a property slump dating back to 2008.

Abu Dhabi’s property market fared better than neighbouring emirate Dubai, which saw a collapse and the restructuring of its flagship firm Dubai World.

However, Abu Dhabi is also facing challenges with a huge supply of high-end homes expected to enter the market. Property prices in the emirate are expected to fall another 11 per cent from here, a Reuters poll showed.

“Merging the two companies won’t turn around the dynamics of the Abu Dhabi property market,” said Robert McKinnon, ASAS Capital chief investment officer. “The problem is that both companies have fairly weak balance sheets and so merging them isn’t going to solve that problem.”

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